Pattie Lovett-Reid: Canadians are more financially vulnerable than they think

Pattie Lovett-Reid: Canadians may be more financially vulnerable than they think

Financial advisors or planners are only for the rich – that’s simply untrue, and a financial myth.

In a recent speech, Bank of Canada Governor Stephen Poloz highlighted in detail just how concerned he is about the debt levels of Canadians – and it doesn’t paint a pretty picture. Canadians have amassed a mountain of debt nearing two trillion dollars which in turn is casting a shadow over the timing of interest rate increases. To put some perspective around this, eight per cent of Canadians owe 350 per cent or more of their gross income. In other words, for every $1 of gross income they owe $3.50, representing a bit more than 20 per cent of household debt.

You have to wonder if households really realize just how vulnerable they are and how this debt burden is impacting their lives.

A report conducted by Oxford University has found that perceived financial well-being – feeling secure about not only your current financial state but how well you have planned for the future – holds the key to your overall well-being.

In other words, your financial security can affect you as strongly as job satisfaction, relationship stability, and physical health combined. Having a financial plan and healthy state of mind is something everyone deserves, regardless of their wealth.

To be fair, all of us will have a different idea of what financial stability means to them. For those loaded with a high debt level, the thought of financial planning can be daunting. Some may have no idea how bad their situation is because it is too hard to confront their financial facts. But not knowing could be even worse.

Here are some tips to help get you up on your financial feet:

1. It’s important to know yourself financially. Begin by putting pen to paper. For at least three days, but preferably five, write down everything you spend your money on – everything! It can be very telling, but only if you are honest with yourself. Mindless spending, like mindless eating, can destroy good intentions and you might not even know you are doing it.

2. Next, set some basic financial goals. These goals should excite you, but also lead to a piece of mind. Some examples include establishing an emergency fund, tucking a little away for retirement, or funding a post-secondary education, which can lead to further wealth creation. The goals need to be yours and matter to you so that you can get excited about them.

3. Meet with a financial planner/advisor or debt consolidator. An advisor can help to clarify the process, break it down, and eliminate the emotion. In other words, do the deep dive into your financial situation without limiting beliefs and with the experience or knowledge you likely don’t have.

Bottom line: don’t feel you don’t have enough money to qualify for help or too much debt to reach out for help, because according to Oxford’s research, not only your financial life, but far more importantly your overall well-being, depends on it.